Council tax

A significant number of local council tax support schemes do not meet the official objective of protecting vulnerable people, according to a report by a committee of MPs. The report calls on the government to assess the impacts of localising council tax support.

A progressive property tax – replacing the 'widely discredited' council tax – could reduce bills for the poorest tenth of households by £202 a year on average, and increase them for the top tenth by £184, according to a new study by the Joseph Rowntree Foundation.

The authors examine the impact of four tax regimes on households: the existing council tax system; the existing council tax system based on revaluation; a flat-rate national property tax; and a progressive national property tax.

Four out of every five English local authorities have reduced entitlements to council tax support in the current financial year as council tax benefit was replaced by localised schemes, according to an analysis carried out by the Institute for Fiscal Studies.

At the same time as abolishing council tax benefit, the coalition government cut central government funding for local replacement schemes by 10 per cent.

2.4 million low-income families will pay on average £138 a year more in council tax from 1 April 2013, says a new analysis from the Joseph Rowntree Foundation. This is a result of the coalition's replacement of council tax benefit (CTB) in England with localised systems of council tax support (CTS), along with a 10 per cent cut in funding.

Low-income families in England will see their council tax bills rise by up to £600 a year from April 2013 as a result of council tax benefit 'reform', according to a think-tank analysis.
From April 2013 the government is handing responsibility for council tax support to English local authorities, at the same time as imposing a 10 per cent cut in funding for it. It is insisting that pensioners are fully protected from any rises under the new localised system, with the result that the changes will hit working-age households disproportionately. The Resolution Foundation study incorporates details of the reported intentions of 184 of England’s 326 local authorities.
Key points

The coalition government has announced new funding of £100 million to support 'best practice' in localised council tax benefit schemes.

In its 2010 spending review, the government announced plans to make local councils in England responsible for council tax rebate schemes – at the same time as cutting the available budget for them by 10 per cent.

The government has now told MPs a grant will be available for schemes designed so that:

Council officials in the Prime Minister’s own constituency have expressed concern over government plans to ‘localise’ support arrangements for council tax payers on low incomes. An internal report, seen by the Observer newspaper, criticises plans to make local authorities responsible for the arrangements from April 2013 while cutting the budget for them by 10 per cent.

West Oxfordshire District Council says that after it has met legal obligations to protect vulnerable groups (pensioners, the disabled and families with children) the 10 per cent cut will mean that people on low earnings will be hit disproportionately. It estimates that working-age people who currently pay nothing will suddenly have to find £420 a year.

Politicians must ‘grasp the nettle’ of tax reform, according to a think-tank report. The existing system of redistribution through tax and benefits is inefficient, and needs to be replaced by one that provides ‘redistribution at lower cost’.

The report draws on findings from the Mirrlees review (2011) and the Commission on Living Standards (2011). It sets out structural reforms designed to improve support for households on low-to-middle incomes. Simply making the existing system more generous to this group will not be sustainable in the long run, it argues.

Any cuts to council tax support in Wales are bound to hit lower-income households, says a think-tank briefing.

The Institute for Fiscal Studies has examined the likely impact on Wales of the UK government’s proposal to devolve council tax support from 2013/14 onwards, and to cut funding for it by 10 per cent. The briefing looks at the options available to the Welsh Government.

PSE:UK is a major collaboration between the University of Bristol, Heriot-Watt University, The Open University, Queen's University Belfast, University of Glasgow and the University of York working with the National Centre for Social Research and the Northern Ireland Statistics and Research Agency. ESRC Grant RES-060-25-0052.